With two Phase 3 assets approaching clinical trial readouts, a government-funded vaccine program including a potential COVID-19 play, and a valuation of approximately $70 million, Soligenix (SNGX) provides a compelling opportunity for investors. Unearthing hidden gems in the biopharma sector is a key focus of Illumination Capital, as we seek value and high growth potential in under-the-radar names such as SNGX. This company’s most advanced product candidate is SGX301 for the treatment of cutaneous T-cell lymphoma or CTCL. So far, two favorable interim clinical trial readouts have demonstrated the product’s efficacy, and a third and final safety and treatment durability-focused Phase 3 trial readout is expected in 4Q 2020. In addition to an upcoming late-stage milestone, we like that SGX301 has shown in interim data that indicates the chance of success in Phase 3 is high. Right behind that asset in the pipeline is SGX942, the company’s treatment candidate for oral mucositis associated with chemoradiation therapy, or CRT, in head and neck cancer patients. The Phase 3 study for SGX942, or the DOM-INNATE trial, completed enrollment of patients in June and results for this program are also expected in 4Q 2020. With these programs expected to reach key inflection points later this year and with global market potential of $200-$250 million for SGX301 and more than $500 million for SGX942, the current value of SNGX is but a fraction of the opportunity that lies ahead. Additionally, the company has vaccine programs focused on infectious disease and biodefense, with prior government funding and additional awards expected to serve as non-dilutive capital for these development programs. Along with vaccine candidates for the bioterrorism agent Ricin and Ebola/Marburg viruses, SNGX is developing a COVID-19 vaccine based on its vaccine heat stabilization technology, with recently published positive preclinical data. With multiple shots on goal from the company’s diverse pipeline, three major upcoming data catalysts, and the potential for pharma partnerships and additional non-dilutive government funding, SNGX’s sub-$100 million market cap is too cheap to ignore.
Source: Soligenix Investor Presentation
Interim clinical data for SGX301 suggest high probability of success for final Phase 3 results
SGX301 is synthetic hypericin, a photosensitizer that is topically applied to skin lesions and then activated by light 16-24 hours after application. Importantly, the therapy is activated with visible light, and thus avoids the skin damaging consequences of ultraviolet light, which is used in other therapy regimens to treat CTCL off label. With photoactivation, SGX301 has been clinically proven to inhibit the growth of malignant T-cells in CTCL patients. Phase 2 clinical results showed a 58.3% improvement in CTCL patients treated for six weeks with SGX301, compared to an 8.3% improvement for placebo patients, which was statistically significant (p<0.04).
In March of this year, the company reported favorable Phase 3 results for the first of three cycles of treatment in the Phase 3 FLASH study evaluating SGX301 for early-stage CTCL. The trial consists of three treatment cycles, each eight weeks in duration. The primary efficacy endpoint was met after Cycle 1, which was a comparison of the percentage of SGX301-treated patients vs. placebo patients achieving a partial or complete response of treated lesions (p=0.04). This is defined as a ≥ 50% reduction in the total Composite Assessment of Index Lesion Disease Severity “CAILS” score for three index lesions compared to the CAILS score for these lesions at baseline. A total of 16% of the patients receiving SGX301 achieved at least a 50% reduction in their index lesions compared to only 4% of patients in the placebo group at week 8, or Cycle 1, and the drug was safe and well tolerated.
Cycle 2 was an open-label treatment and 8-week assessment period, in which all patients received SGX301 therapy. The company reported favorable efficacy and safety results from that cycle in April 2020, with CAILS response rates climbing to 40% for SGX301 treatment, suggesting that the therapeutic response increases with continued treatment (p<0.0001).
Cycle 3 is an ongoing open-label treatment and 8-week assessment period, in which all patients are receiving SGX301 and all lesions of patients that have opted into this cycle will be treated. Key secondary measures for this follow-up cycle are treatment response duration, degree of improvement, time to relapse and longer-term safety. Notably, the majority of subjects enrolled in the FLASH study have elected to continue on into Cycle 3, indicating the benefit of SGX301 therapy.
Based on SGX301 already meeting its primary efficacy endpoint in Phase 3, demonstrating rising response rates over time, and offering superior safety vs. currently used therapies to treat CTCL, SGX301 has a high probability to show positive results in the final cycle of the Phase 3 FLASH trial and become an approvable first-line therapy for this rare disease. As an indication of the importance of this therapy, the FDA has granted Orphan Drug and Fast Track status to the company for SGX301, and in the EU, the therapy has PRIME designation.
Speaking about the data from Cycle 1 and 2, Dr. Brian Poligone, dermatologist and Director of the Rochester Skin Lymphoma Medical Group said:
the response rates we see at six weeks are very promising. Most treatment plans are carried out over a much longer time period, so seeing positive results at six weeks is excellent. Importantly, we would expect the response rates to increase with longer treatment times, as we have observed with the preliminary data for the end of Cycle 2. CTCL patients have variable disease presentations, but it’s our general practice to continue treatment as long as symptoms are being alleviated, and importantly, there is no risk — no increased safety risk.”
CTCL is a rare subtype of Non-Hodgkin’s Lymphoma in which malignant T-cells migrate to the skin to form cancerous tumors or patches. SNGX estimates that 27,000 Americans are diagnosed with CTCL and approximately 20,000 in the EU. Currently, no cure for CTCL exists, and there is no approved first-line therapy for early-stage disease (Stages I-IIA), which represents the majority of affected patients. Current treatments, which utilize ultraviolet light have significant risks including the potential to cause secondary skin cancer and additional skin damage with long-term use
With pricing estimated at $10K per patient per year, which is similar to treatment with photodynamic therapy such as PUVA, and assuming 50% penetration of the market, we estimate that this opportunity could generate approximately $235 million annually in the U.S. and Europe alone. Soligenix estimates the global sales opportunity at $250 million. Considering its inexpensive valuation, we believe the stock is highly attractive given these sales estimates for SGX301.
Source: Soligenix Investor Presentation
SGX942 offers second Phase 3 readout this year, and an even larger opportunity for SNGX
SGX942, or dusquetide, is a novel synthetic peptide designed to aid the body’s reaction to tissue damage and bacterial infection. As a result, this compound is classified as an innate defense regulator, or IDR, which can regulate the innate immune system to reduce inflammation, eliminate infection, and improve tissue healing. SGX942 has shown activity in animal models of mucositis, colitis, skin infection and other bacterial infections, and has demonstrated favorable safety, tolerability, and efficacy for the compound in Phase I and 2 clinical trials.
Phase 2 efficacy results for SGX942 in the treatment of oral mucositis associated with head and neck cancer showed a 50% reduction in the median duration of severe oral mucositis, from 18 days to 9 days (p=0.099) in all patients and a 67% reduction for patients receiving the most aggressive chemoradiation therapy, from 30 days to 10 days (p=0.040). The trial successfully identified the optimum dose of SGX942 at 1.5 mg/kg, and also showed higher tumor complete response at the one-month follow-up visit, demonstrating 63% CR for SGX942-treated patients vs. 47% for placebo at the 1.5 mg/kg dose. Mortality and infection rates also were lower in the SGX942-treated arm, suggesting that the treatment may also aid in overall patient survival. 12-month follow up data confirmed these treatment benefits and the durability of effect. Importantly, patients treated with SGX942 1.5mg/kg used 40% less opioid medication later in the treatment phase of the study, suggesting improvement in the condition over time. In comparison, the placebo group increased their use of opioids by 10% during the same period.
Phase 3 trial for SGX942 designed for successful readout later this year. The company’s Phase 3 trial for SGX942 is fully enrolled and anticipated to read out in 4Q 2020. Notably, the entry criteria for patients in Phase 3 was derived from the successful Phase 2 data with the best results occurring in patients receiving highly aggressive chemoradiation therapy, or 80-100 mg/m2 cisplatin every third week and > 55 Grey fractionated radiation. An independent interim analysis was conducted by the trial’s data monitoring committee, which observed a beneficial effect of SGX942, and based on this analysis, the size of the patient population was increased to improve the chances of study success by maintaining 90% statistical power. While the increase in patient number can be interpreted as a red flag by some, we remain comfortable with the increase given that the IDMC must have seen an efficacy signal to recommend the trial to continue with better resolution. The primary endpoint in the trial is the percentage decrease in the duration of severe oral mucositis with SGX942, compared to placebo. Drug safety, incidence of severe oral mucositis, infection rate, tumor resolution, and survival are key secondary endpoints.
SNGX retains worldwide rights to SGX942, with the exception of the greater China market which has been licensed to SciClone Pharmaceuticals. SciClone will pay the company royalties on sales if any. Given the unmet medical need in oral mucositis treatment and potential importance of this product candidate in the oncology segment, SNGX may be in position to obtain a pharmaceutical partnership for the U.S. market and non-licensed international territories if the Phase 3 DOM-INNATE trial for SGX942 is successful.
The incidence of Americans diagnosed with head and neck cancer is approximately 65,000 annually, and 23,000 hematopoietic stem cell transplant “HSCT” procedures are performed each year in the U.S. with similar numbers in Europe. With severe oral mucositis occurring in approximately 80-90% of these patients, we estimate the total addressable market for SGX942 is 150,000 patients per year in both the U.S. and Europe. Assuming that the company can penetrate 40% of the potential market in both head and neck cancer and HSCT procedures, and with pricing of $7,000 per patient per course of treatment, we estimate sales of SGX942 of $500 million at peak for these indications alone. The sales potential for SGX942 could be even larger if the product is approved and becomes adopted across other cancer types where radiation is typically used. Experts note that severe oral mucositis in cancer patients is a debilitating condition and can significantly reduce treatment outcomes – see last 7 minutes of this video.
In 2016, over 3 million cancer survivors were receiving radiation therapy, and the incidence of oral mucositis is estimated at approximately 80% of these patients. In addition to oral mucositis in head and neck and other cancer types, dusquetide offers upside potential in other indications such as gastrointestinal mucositis, acute gram-positive bacterial infections such as MRSA, acute gram-negative infections, and acute radiation syndrome.
Vaccine pipeline provides non-dilutive financing and upside potential with several programs including COVID-19. SNGX’s vaccine development pipeline is supported by government funding and features programs for biodefense such as the company’s RiVax® vaccine for ricin pre-exposure, and for infectious diseases such as filovirus which causes life-threatening Ebola and Marburg infections. These programs are based on the company’s ThermoVax® vaccine thermostabilization technology, which offers the ability to eliminate the need for cold chain transportation and storage for alum-adjuvanted vaccines, thereby facilitating less expensive and easier storage and distribution of strategic national stockpile vaccines for emergency settings. SNGX is collaborating with the University of Hawaii and Hawaii Biotech, Inc. on its filovirus vaccine program, and is also collaborating with BTG Specialty Pharmaceuticals to use similar technology to develop its COVID-19 vaccine, which recently demonstrated the ability to generate rapid humoral and T-cell immune responses in published preclinical results. A contract with the NIH for $21.2 million is funding progress of the RiVax program, and if this product is approved, the company could monetize its priority review voucher associated with this asset, which could be worth more than the whole company today. Additional non-dilutive funding is anticipated, and the company has been able to manage its cash efficiently by offsetting its overhead expenses with government funding for its biodefense and infectious disease vaccine programs.
Conclusion. While it has taken some time for SGX301 and SGX942 to advance to key inflection points, these programs are now on the verge of achieving pivotal Phase 3 results with high probabilities of success. We believe these results, if positive can drive the shares substantially higher given the extremely low valuation of the stock. Further advancement of the company’s COVID-19 vaccine program has potential to fuel a rise in the valuation as well. The company’s ATM program in addition to the potential for non-dilutive financing from SNGX’s government-funded vaccine development programs and the potential for a pharma partnership later this year help to offset any capital raising concerns, and should also enable the stock to trade up into Phase 3 results and after such results are reported.
Disclosure: I am/we are long SNGX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.